Antitrust Time Travel: Entry & Potential Competition

How should claims of future entry, or its prevention, be addressed? To seriously engage with these claims, one must be prepared to undertake what we call analytical time travel: drawing connections between competition in the past, present, and future through evidence, inference, and educated guesswork. Modest attempts at time travel are familiar in antitrust. Some, like the inference of a firm’s competitive significance from its market share, assume connections between past, present, and future competition. Others, like the evaluation of challenges to mergers under Section 7 of the Clayton Act, assume connections between present and future competition. But nowhere are the demands of time travel more explicit, the tasks more challenging, or the consequences more critical, than in the related doctrines of (1) the defense of easy entry to counter claimed anticompetitive effects and (2) the offense of anticompetitively acquiring a potential competitor.

The time travel metaphor can be best understood by recognizing that antitrust law is concerned with protecting competition in the present, the future, or both. We cannot do anything about competition in the past, but it can help us to understand competition in the present and to predict competition in the future. Likewise, our understanding of competition in the present can help to predict competition in the future. Finally, predictions about competition in the future can affect our view of competition in the present—a point as true for firms making price and investment decisions as it is for tribunals tasked with evaluating antitrust challenges. Analytical time travel can thus involve forward time travel (using past and present conditions to describe the properties of future competition) or backward time travel (using predictions about future competition to describe the properties of present competition).

Time travel labels help to separate and connect entry and potential competition concepts. The “actual potential competition” offense and what we call the “corrective entry” defense involve predictions about the future competitive significance of rivalries not in existence at the time of evaluation. This is forward time travel. These inquiries consider competitors that do not yet exist and how those competitors will impact competition that has yet to occur. The “perceived potential competition” offense and what we call the “preventative entry” defense involve a backward-leaping assessment of how the threat of future rivalry influences competitive behavior today. This is backward time travel. It is as if the future entrants are traveling backward through time to exert their competitive influence upon current market participants.

We use these time travel labels to introduce a helpful way of understanding entry and potential competition arguments. While entry and potential competition theories will probably always be contentious, complicated, and paradoxical, these features are exacerbated by a tendency of courts to describe these theories briefly, without delving into details of what is being claimed to happen and why. Current doctrines are also needlessly burdened by artificial bifurcation of related concepts. Ripped apart and stuffed into separate silos of analysis, entry and potential competition theories have evolved in some peculiar ways—and have failed to evolve at all in others. The thesis of this Article is that a clearer, more accurate, and more administrable understanding of entry and potential competition analysis emerges from viewing these theories not as siloed doctrines but as related facets of the same underlying exercise in analytical time travel.

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